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Stock Market Jargon
Understanding the United States stock market can be tricky, even frustrating at times. This is especially true when you encounter a lot of unfamiliar words that are frequently used but just doesn't make sense. To help you understand a little more of the stock market, I have compiled a few of the basic jargon used in the stock market.
The Key Players
The key players in the stock market are you, your broker and the market maker or specialist. The broker is the person that buys and sells stocks for you. The broker can either be a full service broker, who gets all of your financial data and recommends which stocks to buy, when to buy and when to sell it or a discount or online broker. The discount or online broker also buys and sells stocks for you but you don't meet him face to face. Neither does he give you any advice on which stocks to trade. Both kinds of broker earn money by commission. A commission is the amount of money the broker takes per buying or selling of your stocks. An online broker, for example, takes $8.99 per sell or buy of stocks. The stock brokers buy and sell your stocks to the market maker or specialist. He is a person or computer that is assigned to monitor a particular stock. He is required by law to buy your stocks and to sell them to those that are interested. The specialist earns his money through a spread. A spread is the difference between how much money the market maker is willing to buy your stocks (also known as the bid) and the amount in which the market maker is willing to sell the stocks (also known as the ask). The spread is not more than $0.10 per stock.
Stock Market Strategy
There are different kinds of stock market strategy. One of them is called the buy and hold or conservative strategy where the investor buys the most inexpensive, most undervalued stocks and holds them until the share price of each stock increases. They are not concerned with the daily share price fluctuations but looks at the long term growth of the stock. On the opposite end is the aggressive growth strategy where the investor buys stocks that have higher share prices and sells them immediately once the share price increases. The more the share price increases the more these kinds of investors buy the stocks. Another kind of strategy is to go short, which means that the investor borrows stocks from a stock broker. He then sells these stocks at the prevailing stock price. Once the stock prices decrease he then buys back the stock he borrowed and earns profits from the difference. These kinds of investors profit more when the market is bearish. The stock market has been said to be either bullish, which is a period when stock prices are increasing, or bearish, a period when the stock prices are decreasing.
Getting acquainted with the stock market is like entering into a maze where you only see what's in front of you and as you move along you see other portions of the maze. It is only when you have finished the maze can you see the actual, big picture: the stock market in all its fascinating glory.
The Key Players
The key players in the stock market are you, your broker and the market maker or specialist. The broker is the person that buys and sells stocks for you. The broker can either be a full service broker, who gets all of your financial data and recommends which stocks to buy, when to buy and when to sell it or a discount or online broker. The discount or online broker also buys and sells stocks for you but you don't meet him face to face. Neither does he give you any advice on which stocks to trade. Both kinds of broker earn money by commission. A commission is the amount of money the broker takes per buying or selling of your stocks. An online broker, for example, takes $8.99 per sell or buy of stocks. The stock brokers buy and sell your stocks to the market maker or specialist. He is a person or computer that is assigned to monitor a particular stock. He is required by law to buy your stocks and to sell them to those that are interested. The specialist earns his money through a spread. A spread is the difference between how much money the market maker is willing to buy your stocks (also known as the bid) and the amount in which the market maker is willing to sell the stocks (also known as the ask). The spread is not more than $0.10 per stock.
Stock Market Strategy
There are different kinds of stock market strategy. One of them is called the buy and hold or conservative strategy where the investor buys the most inexpensive, most undervalued stocks and holds them until the share price of each stock increases. They are not concerned with the daily share price fluctuations but looks at the long term growth of the stock. On the opposite end is the aggressive growth strategy where the investor buys stocks that have higher share prices and sells them immediately once the share price increases. The more the share price increases the more these kinds of investors buy the stocks. Another kind of strategy is to go short, which means that the investor borrows stocks from a stock broker. He then sells these stocks at the prevailing stock price. Once the stock prices decrease he then buys back the stock he borrowed and earns profits from the difference. These kinds of investors profit more when the market is bearish. The stock market has been said to be either bullish, which is a period when stock prices are increasing, or bearish, a period when the stock prices are decreasing.
Getting acquainted with the stock market is like entering into a maze where you only see what's in front of you and as you move along you see other portions of the maze. It is only when you have finished the maze can you see the actual, big picture: the stock market in all its fascinating glory.
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